A reader recently forwarded us this article from the New York Times, and thought it might paint a comparative picture of what is going on here, or what could come to be. We’d tend to agree, however, on a much smaller scale (so far). Everybody, ourselves included, likes to keep a watch on other markets that might possibly compare to ours, but few topics get as much traction as the San Francisco vs. New York debate.
However, we leave that discussion up to you, and thought we’d print a few quotes from the article to get you started:
Marcia Van Wagner, an economist and deputy city comptroller, said that while economists can forecast trends, they have trouble predicting just when a “turning point” will appear. Nevertheless, she said that her agency was updating its economic forecasts as concerns mount, and that she was expecting a slowdown in the real estate market, perhaps later this year or next year.
Last Wednesday, the developers of the new 58-story W New York-Downtown Hotel and Residences on Washington Street found that Manhattan market was alive and well. Michael Shvo, whose firm Shvo Marketing is selling the properties, invited 3,000 people who had expressed interest to show up on the opening day of the sales office for the sale of 159 one- and two-bedroom condos. (Another 64 furnished hotel-style condos will go on sale later).
At 7 a.m., when the office opened, there was a line on the street, Mr. Shvo said. By the time the office closed at 11 p.m., two hours later than planned, he said, contracts for 72 apartments had been signed. Prices began at $2,000 a square foot, he said, or more than $1 million for a one-bedroom.
Don’t think we can’t get there ($2000 a square foot). It’s just a matter of time. Thanks D.L. for the link.
[Update: Since we’re on the topic of NYC again, the other side of the story. Thanks “Balanced Viewpoint” for the link.]
–What Market Slump [New York Times]
–Battle Royale: San Francisco or NYC, if you had to choose [theFrontSteps]
Here’s the counter-balance to that article.
http://www.nysun.com/article/66066
We already have this in SF.
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2007/11/09/carollloyd.DTL
Also, someone posted spot on about NYC prices at $1,500-$2,000sqft in another thread earlier. He was spot on.
What about this Chronicle article?
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/11/11/RE1AT6PPT.DTL
Those prices are in Manhattan only. NYC has 5 boroughs, and the other 4 are much cheaper. In fact, many areas of Brooklyn and Queens are cheaper than San Francisco.
And don’t forget Manhattan is 24 square miles of economic powerhouse while we’re 49 square miles of tourist powerhouse. In other words, they have the economic fundamentals to support much higher prices. At least for now. With the Wall Street banks writing off billions on a seemingly daily basis and large headcount cuts coming, I don’t see even Manhattan supporting $1,800 psf for much longer. Give it a year and see what happens.
Right after the 9/11 attacks there was 4-5 month slight down-tick in NYC prices and it was the last time you could have bought in a slightly declining market. Since then the prices have continued to grow into the unattainable; and even so-so areas and apartments have been bought and re-finished with Vikings and are getting well north of $1000 psf. This makes new construction, which is at an all time recent high in NYC, all the more valuable on a relative basis. Anyone that said they aren’t making any more land hasn’t seen the extent to which developers in NYC have gone to build “on top” of existing structures or turn otherwise tiny lot’s into a 6 story, 5 unit condo developments. Then again, NYC is the worlds capital and incomparable to any other US city.
As far as SF in concerned, the market here is stable from what I can tell and is probably going to remain stable for the coming years. I don’t think we’re going to see 2000 psf anywhere other than the most prime locations with all the amenities. And those places would be $2800 psf in NYC and wouldn’t have the amenities (view, parking, etc.).
Wow. Maybe it’s true that markets have no memory. It doesn’t surprise me that people think real estate values can never fall materially – most have never been around to see it happen. But it does, even in cities like New York. Here’s a good recap of what the last big run-up and subsequent fall in New York City looked like. This is not anecdotal – these are clipped headlines from the same New York Times referenced above.
http://njrereport.com/80sbubble.htm
Balanced Viewpoint, your source doesn’t examine New York City.
kenny, did you actually read it, or just skim the first 3 headlines? Read it all the way through. It examines the entire NYC metro area, from Manhattan to Long Island, southern Connecticut, and eastern Jersey.
I read the first few and then started skimming down. It’s almost entirely about New Jersey? And its parent source is a New Jersey R.E. blog too?
Regardless of the parent source, this is a collection of New York Times articles about what happened in that market in the late 80s and early 90s. The parent source for the “What Market Slump” article is this San Francisco real estate blog, but you’re not discounting that. In any case, people can think what they will. If you don’t have time to read the summaries, here’s one from 1995 that wraps it all up nicely:
“OWNERS of residential real estate in New York City, particularly those with co-ops, may look back on 1994 as the year when it once again became possible to sell their homes — even studios and one-bedroom apartments. It still wasn’t easy, and the big profits of the 1980’s remained only a memory, but the increased demand and stable prices were a substantial improvement over the early 1990’s, when market activity slowed drastically and prices fell.”
Can’t compare NYC of the 80’s to NYC of present day. It’s a totally different city and the economics of the city and its residents are totally different. That said, NYC prices in 2003 seemed so out of reach and insane and they only continued to rise; sure they may have been fueled slightly by sub-prime and Alt-A loans, but the point is that RE can, and do, rise for other reasons such as general economic growth within a region. How many small towns have housing price growth when a large corporation opens up a new factory? There are multiple forces at work and the current crisis is real; but that doesn’t mean that SF and NYC are going to collapse.
We can all agree though, that owning vs. renting for the past 10 years has been a big time homerun. And the beauty is, as an owner, you’re 10 years older, but much wealthier, and as a renter, you’re 10 years older and have nothing to show for regarding your return on rent.
I’m grateful everyday that I own some choice properties in SF. Eveything always seems expensive at first, until you look a couple years back and smile.
BT, very true. Except for those internet stocks in 2000.
Those internet stocks with no earnings were great weren’t they? :) My theory is that way more people made money from that age than lost. I know for one I sold my “B2B Holders” index fund and bought property in 2002.
Scary thing is now we have all the internet companies making BANK now. So much tech / internet money streaming in to the city. Go away! lol